ECO 561 Course Great Wisdom / tutorialrank.com ECO 561 Course Great Wisdom / tutorialrank.com | Page 5

20) If personal taxes were decreased and resource productivity
increased simultaneously, the equilibrium
A. output would rise
B. output would fall
C. price level would necessarily fall
D. price level would necessarily rise
21) Expansionary fiscal policy is so named because it
A. involves an expansion of the nation's money supply
B. can only be attained by expanding government consumption
C. is aimed at achieving greater price stability
D. can motivate an expansion of real GDP
22) Suppose the price level is fixed, the MPC is .5, and the GDP gap
is a negative$100 billion. To achieve full-employment output
(exactly), government should
A. increase government expenditures by $100 billion
B. increase government expenditures by $50 billion
C. reduce taxes by $50 billion
D. reduce taxes by $200 billion
23) GDP understates the value of output produced by an economy
because it
A. includes transactions that do not take place in organized markets,
such as home cooked meals
B. includes environmental degradation caused by increased output
production
C. excludes value added from the underground economy, such as tips
taken under the table
D. excludes the value of the wages and benefits of government
employee
24) Other things equal, a decrease in the real interest rate will
A. shift the investment demand curve to the right
B. shift the investment demand curve to the left